How are taxes assessed according to Proposal A?

Proposal A, enacted in Michigan in 1994, significantly changed the way property taxes are assessed within the state. Under this proposal, taxes are assessed based on taxable value rather than purely on market value. Taxable value is typically calculated by taking the lesser of the property's assessed value or its capped value, the latter of which limits increases based on a formula tied to inflation and the previous year's taxable value.

This approach aims to provide more stability to homeowners by preventing substantial increases in property taxes due to fluctuations in the real estate market. It allows for more predictable tax bills since the taxable value can only increase by a specific percentage each year, typically no more than the rate of inflation, which encourages fiscal responsibility in tax assessment.

Understanding this mechanism is critical for anyone dealing with property taxes in Michigan, as it directly influences how much one pays in property taxes and how assessments are conducted over time. In contrast, market value assessments can lead to volatile tax rates, making the use of taxable value under Proposal A a stabilizing factor for property owners.